Customer relationship management in the traditional retail banks in france
Customer Relationship Management in the traditional retail banks in France
ELISE LIU (1715690)
The dissertation is submitted in part-fulfilment of the degree of Master in Business Administration in Finance
Dublin Business School and Liverpool John Moores‟ University 2013
Date of submission: May 2013 Word count: 17 342 words
TABLE OF CONTENTS
LIST OF FIGURES
CHAPITRE 1: INTRODUCTION
Background to the study
The development of the IT system and banks
Evolution of the Internet banking in France
Evolution of relationship in the traditional retail banks
Motivation for the study
Approach to the Dissertation
Limitations of the research
Major contribution of the Study
Overview of the following chapters
CHAPITER 2 : LITERATURE REVIEW
What is a relationship?
Customer Relationship Management
Objectives of CRM Systems
CRM as a strategy
CRM in banking sector
IT adoption and older adults
Service quality and CRM practice
CHAPTER 3: RESEARCH METHODOLOGY AND METHODS
Distinction between research method and methodology
Secondary data collection
Primary quantitative data collection
Ethical issues in data collection
Limitation of research
CHAPTER 4: DATA ANALYSIS AND FINDINGS
Quantitative data analysis and finding from the questionnaire
Background information about respondents
Demographic characteristics of the sample
How long have you been using your bank online (online banking) services? 66
Which support do you use the most to access online banking services?
How often do you use the online banking services, approximately?
The reason for the use of the Online banking services
Research objective 2: To assess the perception of online banking services from
French users towards the importance of physical contact at bank level. 4.4
Research objective 3: To analyse whether French people are ready to switch
from Click-and-Mortar to Pure player bank.
H1: Customer relationship management increase the quality of online banking
services. 75 4.5.2
H2: Service quality enhance customer’s satisfaction
H3: Customer satisfaction positively impact on customer loyalty
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 5.1
Research Objective 1: To identify effectiveness gaps in use of online banking
services between older people and young people. 5.2
Research Objective 2: To assess the perception of French online banking
services users’ towards the importance of physical contact at bank level. 5.3
Research Objective 3: To analyse whether French people are ready to switch
from Click-and-Mortar to Pure Player. 5.4
Hypothesis 1: Customer relationship management increase the quality of
online banking services.
Hypothesis 2: Service quality enhance customer’s satisfaction
Hypothesis 3: Customer satisfaction positively impact on customer loyalty
CHAPTER 6: SELF REFLECTION AND LEARNING
Learning outcomes and self-analysis during the learning process
6.2.1 Research and investigative skills
Team working skills
Personal management skills
Plans to sustain learning
LIST OF FIGURES Figure 2.1: The basic elements and conceptions of relationship
Figure 2.2: Relational and transactional customers
Figure 2.3: The components of customer relationship management (CRM)
Figure 2.4: CRM Strategic framework
Figure 2.5 Technology Acceptance Model
Figure 3.1. Research Methodology Sequence Structure
Figure 3.2. The research onion (Saunders et al., 2011)
Figure 4.1: Gender of the sample
Figure 4.2: Age of the sample
Figure 4.3: Education level
Figure 4.4: Time being online banking services user
Figure 4.5: Support to use the most to access online banking services
Figure 4.6: Frequency
Figure: 4.7: The reason for the use of online banking services
Figure 4.8: Satisfaction
Figure 4.9: Importance of direct human contact
Figure 4.10: Managing bank account only online
Figure 4.11: Being assigned a financial adviser only with long distance contact
Figure 4.12: Do you trust in the use of your bank website?
Figure 4.13: If your bank anticipates your needs and expectations, will you assess it as a component to increase the service quality that your bank could offer you? 76 Figure 4.14: I am happy when my bank proposes financial products or services, which are appropriate to me.
Figure 4.15: Will you switch banks for any reason, even when you are satisfied with your actual bank?
I would like to express my gratitude to the following for all their help throughout the duration of this project.
To my supervisor Michael Kealy, who has always been there to provide encouragement, guidance and critical evaluation throughout the course of this research. Thanks also to all those who answered my questionnaires.
Finally, many thanks to my family and friends for their support and understanding during the course the MBA.
Transparency, honesty, consideration, competence, proximity are the guarantees that any company must provide to its customers. The banking sector is no exception to the rule. In these difficult times of financial crisis, the relationship between financial institutions and their customers is complicated dangerously. It is time to restore the confidence between the two parties. Easier said than done, however, the task is not simple. Furthermore, the explosion of media communication and new technologies is another stone to put in an already difficult situation to build customer relationship. Today, the multichannel management for traditional banks are a reality that institutions cannot and should not ignore. Faced with intense competition, especially the evolution of Internet banking, to put the customer in the centre has never been so important. In order to achieve this, traditional banks must put the customer in the centre of their strategy. They use marketing (relationship marketing) to redefine information about current and potential customers to anticipate, respond and exceed to their needs. This practice is known as Customer Relationship Management (CRM), where the main objective is to help companies and financial institutes achieve and sustain competitiveness.
The researcher intended to address this fact within this dissertation and to understand whether the traditional retail banks are competitive towards the Internet banking and if the CRM have a positive impact on the customer loyalty in traditional banking? The study could contribute to the bank managers in France in order to help them in their actual strategy and the orientation of their future strategy. However the study could also be useful for bank managers in other countries. 7
CHAPTER 1: INTRODUCTION
CHAPITER 1 INTRODUCTION
This chapter will introduce the reader to the dissertation study and set the research in context. The second section explains the aims of this study and Section 1.3 explains the motivation for this study. Section 1.4 introduces the research questions while Section 1.5 introduces the hypotheses. Section 1.6 presents the research approach. Then follows the presentation of the limitation (Section 1.7) and major contribution (Section 1.8) of the study. Finally, the last section of this chapter, Section 1.7, provides an overview of the subsequent chapters.
Background to the study
1.1.1 The development of the IT system and banks The new Information Technology (IT) is becoming an enabling feature in the development of business growth and especially in the financial services industry (Turban et al., 2012). The information technology develops gradually but effectively on the banking area. In the first step, the implementation of voice service via phone and fax, the latter was considered as the main and fastest way, which the customer could access to their account. Secondly, and more specifically in France, the establishment of telematics communication system "Minitel" offered a variety of services to customers. The implementation of electronic services (ATM, call centre, fax, so on) was benefit for both customer and bank (Chimote and Srivastava, 2011). 9
Activity in the traditional banking sector has experienced an important transformation of channels marketing of products and services. New contact channels have been developed in order to create closer relationships between the customer and bank, and contributed consequently to the strengthening of loyalty (Palmer, 2011) between the customer and their financial institution. Thus, the overall strategy of financial institutions was primarily and specifically, customer-oriented (Ennew and Waite, 2007). Consequently, this change will probably have a negative affect in the profitability of financial institutions. It may be affected by operating expenses, notably network operating expenses, which weigh heavily. To overcome this situation, banks employ the new technologies, which expected to reduce the operating costs of production and operating expenses (Turban et al., 2012).
The service sector and specifically the banking industry, is constantly evolving (Omariba et al, 2012). Banks are one of the most innovators who follow and renovate unceasingly their business, and takes advantages of the new technologies. Electronic commerce and the Internet have brought radical changes to the banking sector, such as the arrival of purely virtual institutions “Internet banking” (pure player) and online banking services delivering by traditional bank though their website (click-andmortar). For twenty years, there has been in this field a remarkable technological evolution, which has two objectives: to improve banking services in order to respond carefully to various customer needs and finding ways to develop relationships with their customer (Chimote and Srivastava, 2011).
It is in this way that all banks were determined to follow the IT renovators, and pooled their effort in a strategic synergy. Indeed, the control and initiation in this 10
sophisticated technology have become important in banking strategies. However, there is an important competitiveness of banking market (Ramseook-Munhurrun and Naidoo, 2011), which led banks to build criteria and differentiation between them. Thus, the development of new technologies has been a major component for banks to position themselves differently one to the others. The online banking services proposed by the traditional banks is one of the most successful e-businesses (Goodarzi, 2008). It allows customers managing their money on their bank website, such as checking the balance, transferring money to a third party, payroll payments, ordering cheques, and so on.
1.1.2 Evolution of the Internet banking in France The Internet banking is in constant evolution over the past few years. According to statistics from Eurostat (2013), which provide statistical information to the institutions of the EU, found that the number of Internet banking users represented 54 per cent of the Internet users in 2012 up from 18 per cent in 2006. 52 per cent of the people aged 16 to 24 (20 per cent in 2006), 63 per cent of 25 to 55 years old people (26 per cent in 2006) and 48 per cent of 55 to 74 years old (6 per cent in 2006) uses Internet.
Since 2006, the banking system in France has been transformed with Internet banking, which is growing rapidly. For example, ING Direct, a leading pure player bank in France, registered a new account of 76% growth in 2011. Pure players in the banking sector are attracting more and more customers who are not satisfied with their traditional bank or seeking to reduce their spending with the financial crisis. They find 11
that choosing an online bank, allows them to pay less and get cheaper deals than through their traditional agency. Not always satisfied with their banking institution, French people start trusting more and more on Internet banking.
In 2011, more than two million French people have opened an account with a pure player bank. The development of the Internet and mobile telephony leads the success of the Internet banking. According to the world statistics, in December 2011, there was 2 267 million Internet users, which represents 32.7 per cent of the worldwide population comparing to 5.8 per cent (300 million users) in 2000 (Omariba et al, 2012). Thus shows us that the Internet will still play an important role in the future. Furthermore, compared to 2005 the Internet banking consumers almost doubled in 2011 (from 46 million to 72 million households). Therefore the Internet banking will probably continue to growth and accelerate.
In addition, many French people are facing geographical mobility (i.e. businessmen who work in international companies). This situation plays in a positive way for Internet banking as those banks could meet the needs of all people who encounter problems with the availability to go to a physical bank. Furthermore the use of Internet banking allows those people managing their bank account anytime and anywhere. It saves time and money. The only transactions that cannot be done online are cash deposits and withdrawals.
1.1.3 Evolution of relationship in the traditional retail banks In France, the two main challenges in the banking area are the threat of new entrants and the increase of competition. The Internet banking rises the competitiveness inside the banking markets. In order to be competitive most of the traditional retail banks implement their own website delivering online services. Some use it as a major competitive strategy and believe it is essential to be competitive (Turban et al., 2012).
The evolution of IT has changed the interaction mode between Bank and Customer. Banks have gradually moved from face-to-face relationship to a faceless relationship (Gummesson, 2002), for instance in the use of ATM and online banking services proposed by the traditional banks such as new interaction by mail, online direct communication (chatting) through customers‟ bank website account.
According to Gummesson (2002), the relationships are central for business people; therefore, CRM system (Customer Relationship Management) has become an imperative strategy in the banking area (Tamilarasan, 2011) in order to develop interaction with customers to gain customer retention. Banks are the prime users of CRM (Han-Yuh, 2007). The CRM is an important valuable asset for banks. Invest in this relationship asset generates returns of long-term profit and also generates value for shareholder. (Person, 2011)
In the banking sector, there are traditionally three different channels: the traditional retail branch that called brick-and-mortar, the click-and-mortar which activity is in support of the Internet service and the virtual banks, pure player, which have no physical location and has only online transactions (Turban et al, 2012). This study will focus on the click-and-mortar, as today; most of banks have implemented their own online services in the traditional banks. The researcher will investigate among people using their bank website services in order to assess whether traditional retail banks are competitive towards the Internet banking and if the CRM have a positive impact on the customer loyalty in traditional banking? Furthermore, this dissertation will focus only on the people who use their traditional bank website services, in France. The researcher used in this study the term “online banking services” to reference services delivered online by the traditional retail banks.
The main purpose of the present dissertation is:
To identify effectiveness gaps in use of online banking services between older
people and young people.
To assess the perception of online banking services from French users towards
the importance of physical contact at bank level.
To analyse whether French people are ready to switch from Click-and-Mortar
to Pure Player bank.
Motivation for the study
The inspiration of this study is from personal interest in the financial area, especially the banking institutes, where I worked as internship for more than one year. Furthermore, the adoption of the online banking services has significantly increased in the recent years. During my internship period in a financial institute, I saw that customers come less and less in the bank branch and did most of their transactions through the bank website. Therefore, people wonder whether the Internet banking will substitute the traditional banking, this motivates the researcher to get an in-depth investigation.
The researcher hopes that this dissertation could provide some useful perspective to managers on banks future strategy and recommendations will be given according to the research result.
The present study attempts to answer the following research question:
Are the traditional retail banks are competitive towards the Internet banking in
Does the CRM have a positive impact on the customer loyalty in traditional
The research hypotheses for this research are:
Customer relationship management increase the quality of online banking
Service quality enhance customer‟s satisfaction
Customer satisfaction positively impact on customer loyalty
Approach to the Dissertation
This paper of research has been approached in mainly three stages. Firstly analysis of the relevant literature review in order to have an over view of the subject area.
Then primary data were collected using quantitative technique. This study employed electronic questionnaires. The researcher was sent an email with a hyperlink of her questionnaire to her friends, relatives and colleagues who use online banking services. Those people were asked to do in the same way. The hyperlink of the questionnaire were also put in the social and professional website (Facebook, Twitter and LinkedIn) and online banking services users were invited to contribute for completing the questionnaire. Moreover, the researcher also put the questionnaire on the Internet forums. In total 84 questionnaire were completed. The population targeted was in the age over 16 years of age.
After that, conclusion was draw and recommendation was given based on the analyses of the primary and secondary research. 16
Limitation of the research
Due to time constraint, the researcher was limited in the number of respondents. The researcher proceeded with the electronic questionnaire. Thus, responses from people aged over 46 were very low, because they have less knowledge of how to use information technology. Therefore the majority of respondents were people aged between 16 to 45 years.
The researcher was staying in Dublin throughout the dissertation period, she was not able to give the administrate questionnaire to people who were not Internet users, such as the majority of older adults, although some older people responded through the Internet that is was less than the researcher‟s expectation. This study covered mainly French people speaking English as the questionnaire were in English. Therefore, the sample may not be representative of the whole French people.
Major contribution of the Study
Today, the bank has chosen to focus on a relationship of trust and transparency in order to attract new customers and continue the existing customer's retention efforts. Their actual strategic axes are to have a personalized offer, a multi-channel digital approach and managing the evolution of clients.
Thus, in this way, the researcher wishes that the study could contribute to the bank managers in France in order to help them in their actual strategy and the orientation of 17
their future strategy. However the study could also be useful for bank managers in other countries.
Overview of the following chapters
Chapter Two present relevant literature reviews for this study. First, section 2.1 explains what the relationship is in the business context. Then, following presents an over view of the relationship marketing and the customer relationship management system. After that, it explores the relationship on the banking industry and its importance to improve the quality of service, responds to customer expectation in order to gain customer satisfaction and customer loyalty, and thus to have a positive effect on the benefits of the companies. Among this chapter, older adults and the use of IT systems are also discussed in order to explore the “digital divide”. Chapter Three explains the research tools adopted and provides a profile of the research subjects. Chapter Four presents the research results and findings based on the primary data research conducted throughout this study. Chapter Five include a discussion of the findings of this study, their conclusions and recommendations. Chapter Six. And the final chapter adopt an analysis of the researcher self-reflection on learning processes. The chapter six will also evaluate learning outcomes throughout the whole BMA programme.
CHAPTER 2: LITERATURE REVIEW
CHAPITER 2 LITERATURE REVIEW
This chapter embraces relevant literature in order to provide secondary data for this research project. The chapter is divided into various sections. The first section starts to explain what a relationship focus on the marketing is. Section 2.2 will present an overview of the relationship marketing, follow by the Customer relationship Management and its‟ use on banking sector. Section 2.4 discusses the trends of aging population and the IT adoption issue. This literature chapter will finish with service quality and customer relationship management practice, customer expectation, customer satisfaction and customer loyalty.
What is a relationship?
Relationship is around us at each life level, such as in the workplace, domestic and social place. According Gay et al. (2007) relationships are formed through experiences with individuals or inside groups. Gummesson (2002) considered that relationships are the core of human behaviour. However, this study is orientated to relationships in business context thus relationships were defined differently in their objectives and processes than a personal relationship. Damkuvienė and Virvilaitė (2007) conducted a study in the relationship concept and found various definition of relationship in business context from different authors (see Figure 2.1).
Figure 2.1: The basic elements and conceptions of relationship Relationship conception
Scientist Authors Relationship is an interaction of
mutually committed sides. Relationship
develops during a particular time and is
a chain sequence of particular actions (episodes of interaction). A true relationship reflects a situation
when both sides make commitments to
each other. The minimum requirement is
to purchase services at least two times. Relationships develop during a particular period of episodes. If an organization does not feel any
consumer response based on his
A mutual dependence is a must, but it is
not the only sufficient condition in order
Johnston (1986); Mutual, long-lasting,
a relationship could exist.
Dwyer et al.
Relationships are defined as long-
lasting, dynamic and continuous
Relationship is a succession of
behavior or attitude, after the organization has made direct marketing attempts, it means that no relationship is present.
continuous and long-lasting interactions.
However, successful interactions may
not necessarily end up with a relationship, as mutual understanding should exist, signifying a special status, valued by both sides. 21
Relationship is something that develops
through mutually beneficial exchanges.
In order a relationship could exist
an offer (condition of
the individualization (differentiation) of
an offer, closeness to a consumer that is
emotions, which are experienced through an individualized service, mutual interaction and continuous periods are necessary. Scholars Authors The existence of true relationship needs
an apparent mutual dependence,
Interdependence as a symmetry of roles
meaning that both sides have to act, form and reform relationships. Marketing relationships are processes
that are achieved through a mutual
Interdependence Promise keeping
exchanges and promise keeping. Relationship cannot be explained applying the concept of exchange because it is too narrow. If a relationship, based on trust, develops, exchange occurs from time to time. Relationships have to be meaningful
(significant) for both sides.
Source: Damkuvienė and Virvilaitė (2007)
In generally, the relationship exists only when the supplier and buyer know each other (Little and Marandi, 2003), although among various definitions of relationship from various authors in scholarly (Figure 2.1), relationship concept may be interpreted in
two ways: behaviour relationship and perception relationship (Damkuvienė and Virvilaitė, 2007).
Relationship through behaviour approach considered relationship as repeated interactions with an organization and Little and Marandi (2003) added that this behaviour provides mutual benefit and perceived by both parties as a relationship, while relationship through perception approach give more importance of emotional bonds with an organization.
Therefore, relationship is creating throughout long-term development, trust and mutual commitment (Garbarino and Johnson, 1999; Varey, 2002; Little and Marandi, 2003; Batterley, 2004;) but also interdependence (Grönroos, 1994) with an organization.
In the marketing, there are many types and categories of relationship. Little and Marandi (2003) pointed out that Morgan and Hunt (1994) outline four categories and ten types of relationship, while Gummesson (1999) outline thirty types of relationship. Thus relationships marketing involves more than just customers, although in this study, the researcher focused on customer relationship.
The idea of relationships between B to B and B to C has become central to modern marketing (Palmer, 2011). The relational approach is often referred to relationship marketing, which has grown over the past two decades (Persson, 2011). The main objective is to establish, maintain and enhance relationships with customers for mutual benefit and strength customer loyalty. Palmer (2011) views the relationship as an expectation of future transaction. 23
Now companies are paying more attention to keep existing customers for long-term, whereas finding a new customer was more important than paying attention to existing customers. Indeed, attracting a new costumer might cost five times more than to retain an existing customer (Kotler, 2005). Therefore, companies shift from a transaction orientation to a relationship orientation.
Banks adopted the Relationship Marketing (RM), which is considered opposite to Traditional Marketing (TM) as TM (marketing mix) focuses on how to get new customers while RM is more oriented on how to keep existing customers. Gummesson (2002) defined Relationship Marketing as “marketing based on interaction within networks of relationships”.
There is still no universally agreed definition of Relationship Marketing (RM). However, a universally theory was agreed. According to Gronroos (1994) the main objective of RM is “to establish, maintain and enhance relationships with customers and other partners, at a profit so that the objectives of the parties involved are met. This is achieved by mutual exchange and fulfilment of promises.” (Little and Marandi (2003) The relationship marketing‟s focus is to develop relationship with individual customers - one to one marketing and also by making offers on-measure. This approach is a contribution of new technologies. (Berry and Parasuraman, 1991; Johnston and Clark, 2005; Chimote and Srivastava, 2011)
Johnston and Clark (2005) claimed that only a good marketing alone would not develop relationships with customers. Loyal and valuable customers are created when a level of service is delivered and satisfies customers. In the financial service area, customers may be loyal but not have a relationship with the organization. Moreover, many customers do not wish to create a relationship with their bank.
Therefore, relationship Marketing is not suitable for all customers. Gronroos (2000) cited by Little and Marandi (2003), observes that there are two categories of customer in the business relationship: Transactional customers and active or passive relational customers (see figure 2.2). Transactional customers may not necessarily wish to create relationship with supplier while relational customer appreciates relationship. Therefore it is necessary to distinguish between the different categories of customer in order to target effective marketing. That is why the Customer Relationship Management was adopted.
Figure 2.2: Relational and transactional customers Customer’ expectations and reactions
Transactional customers are looking for solutions to their needs at an acceptable Transactional mode
price, and they do not appreciate contact from the supplier or service provider between purchases. Active relational customers are looking
Active relational mode for opportunities to interact with the